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July 03, 2000 02:00 AM

Deal has potential, but it's up to OEMs

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    AKRON—The collaboration between Goodyear and Group Michelin over an industry-standard run-flat technology has a lot of potential, and the economic windfall could eventually be large.

    During a June 23 press conference announcing the alliance, Michelin Chairman Edouard Michelin said he foresees the day when virtually all vehicles will come out of the factory wearing run-flats.

    Several analysts agreed that in order for run-flats to gain more widespread acceptance, some kind of partnership makes sense.

    "You're now going to have the largest tire companies in the world providing the same run-flat technology, which will make it much more attractive for the auto makers to put it on as original equipment," said Wendy Beale Needham, an analyst with New York-based Donaldson, Lufkin & Jenrette. And that should lead to replacement demand, as well.

    Efraim Levy, an analyst with Standard & Poor's Corp., said there hasn't been much demand from car companies for a run-flat, but "having other tire companies involved helps accelerate the expansion and provides an impetus to adopt to a standard. It's worth it to give the technology away."

    "Having two of the biggest companies behind (PAX) allows for easier innovation and possibly leads to lower-priced products," said Dennis Virag, managing director of the Automotive Consulting Group Inc. "Price is always an issue, and will be to the OEs. The market could pressure the auto companies to adopt the technology."

    DaimlerChrysler A.G. and General Motors Corp. both said it's probably too agreement may impact them.

    A Ford Motor Co. spokesman said the company believes "that our customers will be interested in these technologies. But we can't predict how quickly they'll be accepted by consumers, and so we can't really predict how quickly we'll be moving to introduce them into our vehicles."

    Tire manufacturers were somewhat more cautious.

    A spokeswoman for Bridgestone/Firestone Inc., which has dabbled with its own version of a run-flat system, said: "We feel that collaboration within the industry and among the manufacturers, which benefits the consumer, is a good thing.

    "However, since we've not had the opportunity to review specifics of this transaction, we really can't discuss the merits of the technology at this time."

    Pirelli S.p.A. called the agreement positive. "In fact, the more tire manufacturers that are involved in this project, the more original equipment manufacturers will be inclined to accept this new standard," declared Marco Tronchetti Provera, chairman and CEO of the Pirelli Group. He noted that the Italian tire maker has been a "privileged partner" in the PAX system since February 1999, and has contributed "significantly to the development of this innovative technology."

    But Germany-based Continental A.G. said it "has been forging ahead with the development of solutions for tire failure on several levels—both parallel and integrated."

    Outlining its two approaches to run-flats—a complete tire-and-wheel system or a "safety ring" mounted on a normal rim—the firm said "a change in tire/wheel system technology cannot be justified, due to tire punctures being so uncommon statistically....

    "An inexpensive and simple way of extending mobility is what vehicle manufacturers and consumers want."

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